On starting investing early: this one of the weirdest things I find when I stumble upon such blogs. At 18 people’s earning potential is largely whatever the neighbor pays for mowing the lawn. Or the proverbial burger-flipping. Things kick in—in my experience, yours may vary, I mostly gathered this experience in the IT industry in Central Europe- about 3 years after graduation. Say at 28 years old. $1000 invested at 18 for 8%, which is very, very hard to save, worths $2150 at 28, yet at 28, 3 years into working a career, it is far far more easier to save $2150 than $1000 at 18. As long as people don’t have a “grown-up” salary (hard to tell how much, location-dependent, but let’s say: until they cannot consider renting a whole apartment, not just a room) this seems pointless.
Another aspect is spending needs. 18 to 23 people want to party and impress each other and they have a lot of energy, so they should not save. Because they want to experience fun without financial constraints. From say 23 on, they calm down a bit, and can save easier. From 30 on they may have kids, so it gets harder again, from 40 on, 45, they may become managers so it can get easier as they are paid better, from 55 on I see this panic that enjoy things while I am fit enough to do, like travel, and from 70 on people cannot really do much so they simply not need much money. I don’ t think it makes sense to calculate how much to have at 70. When people cannot walk down the block they are not looking at going on holidays etc. at least in my experience they stay at home.
The best reason for encouraging people to save even when young may be that it helps form habits they’ll be glad of later, including the habit of not trying to live “without financial constraints” (because unfortunately those are always there and you don’t gain anything by pretending otherwise).
Also, I think your calculation isn’t the best one: you need to look at the age-28 gains from having saved $1000 per year for 10 years—including the fact that the resulting money is there just as if you’d invested it afresh at age 28. It’s not as if putting money into savings at age 28 is an alternative to doing it when younger: you can do both.
This request prompted me to post to LW something I long ago wrote on Google’s Knol: Twenty basic rules for intelligent money management.
On starting investing early: this one of the weirdest things I find when I stumble upon such blogs. At 18 people’s earning potential is largely whatever the neighbor pays for mowing the lawn. Or the proverbial burger-flipping. Things kick in—in my experience, yours may vary, I mostly gathered this experience in the IT industry in Central Europe- about 3 years after graduation. Say at 28 years old. $1000 invested at 18 for 8%, which is very, very hard to save, worths $2150 at 28, yet at 28, 3 years into working a career, it is far far more easier to save $2150 than $1000 at 18. As long as people don’t have a “grown-up” salary (hard to tell how much, location-dependent, but let’s say: until they cannot consider renting a whole apartment, not just a room) this seems pointless.
Another aspect is spending needs. 18 to 23 people want to party and impress each other and they have a lot of energy, so they should not save. Because they want to experience fun without financial constraints. From say 23 on, they calm down a bit, and can save easier. From 30 on they may have kids, so it gets harder again, from 40 on, 45, they may become managers so it can get easier as they are paid better, from 55 on I see this panic that enjoy things while I am fit enough to do, like travel, and from 70 on people cannot really do much so they simply not need much money. I don’ t think it makes sense to calculate how much to have at 70. When people cannot walk down the block they are not looking at going on holidays etc. at least in my experience they stay at home.
The best reason for encouraging people to save even when young may be that it helps form habits they’ll be glad of later, including the habit of not trying to live “without financial constraints” (because unfortunately those are always there and you don’t gain anything by pretending otherwise).
Also, I think your calculation isn’t the best one: you need to look at the age-28 gains from having saved $1000 per year for 10 years—including the fact that the resulting money is there just as if you’d invested it afresh at age 28. It’s not as if putting money into savings at age 28 is an alternative to doing it when younger: you can do both.
Old people often have relatives who need money and get sick, which is also expensive.